We moved into a new house and I see these cables in our garage. They come from the ceiling and are right near our water heater and breaker panel. There are 2 cables. One cable is labeled “System to House” and the other is labeled “Back to Main”. One of the cable jackets says that it’s CAT-5e cable, but this doesn’t look like any Ethernet cable that I’ve ever seen, especially with those weird things on the end (LEDs, sensors?)

Cat-5e isn't necessarily Ethernet, it's just a specific type of cable and Ethernet is the most well known use for it.
– immibisDec 24 '18 at 3:22

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Thermostat wiring? You'll have to trace the cables to get the correct answer.
– MonkeyZeusDec 24 '18 at 14:17

Since only 2 wires are spliced its not Ethernet, could be voice or alarm, when I have built homes I dropped lines in every room including garrage several I even left multiple drops in the attic for cameras
– Ed BealDec 24 '18 at 18:02

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The connectors in the photo are most commonly used by phone company personnel, and are not readily available in your neighborhood hardware store or home center. So my first guess would be that this is plain vanilla phone wiring.
– Hot LicksDec 25 '18 at 4:09

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They are most used by phone company personnel but the most definitely are available at home centers homedepot.com/p/…
– manassehkatzDec 25 '18 at 6:43

5 Answers
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I can't quite be sure from the picture, but the red things are each joined to a wire from one of the two cables, right? If so, they're just splices, like wire nuts but for this kind of wiring.

So, this part doesn't tell us much about the purpose of the wiring. It could be any kind of signaling cable, though having the wires untwisted like that (and having only two connected, even) would not work for high-speed Ethernet.

It could be a telephone line (likely, except the labels seem a bit odd for that), part of a security system, or some kind of home automation. You will need to find the other ends of the cables to learn what they're used for.

If there are cables elsewhere that might be these but you aren't sure, you can get a "tone and probe" kit to send a signal on one of the unused wire pairs of one of the cables and wave the probe around other ends (or even through a wall) to detect where it runs.

Those red things are a 3M Skotchlok or equivalent, which is a water-resistant (gel filled) way of joining small wires. Very common in the telecoms industry, though they don't work particularly well at high frequencies.

Especially as only one pair (two wires) is joined, this is almost certainly a joint in your telephone line.

Cat5e and similar is often used for telephone line - it is almost the same price as older Cat3 cable, can easily be converted to Ethernet usage in future, and can provide better performance when used for things like VDSL.

As other answers have pointed out the things on the end are "jelly crimps" typically used to join phone wiring.

My guess would be that the previous owner had some kind of telephone related equipment* installed at that location between the incoming line from the telco ("back to main") and the wiring to the phones in the house ("system to house") and that when he removed his equipment he spliced the wires together so the phones would work.

* Maybe a filter for a DSL modem, maybe a fax machine, maybe a VOIP gateway, maybe a full-on PBX.

These could also be for HVAC. I installed a cat5e net for a client once only to have another contractor use it for his HVAC cabling. Populated my punch downs and everything. We were all furious but we learned that twisted-pair telephone wire is used in a lot of applications we don’t realize.

A phone line in the garage seems odd, doesn't it?
– JoeDec 24 '18 at 16:00

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@Joe, not if you have a workshop in the garage. They're not common, but I've seen houses with phones in the garage before. Of course, hard-wiring phones is becoming more and more odd in the first place. Darn cell phones!
– JBHDec 24 '18 at 17:38

@JBH I guess... i'm just not old enough :) I do think ethernet might make sense nowadays, but that's obviously not ethernet given the rest of whatnot up there.
– JoeDec 24 '18 at 18:17

@Joe, I understand. Frankly, I just finished remodeling my house. No hard telephone line but I did include network connections. Looking back on it, I wish I'd ignored those, too. Wireless has become so ubiquitous....
– JBHDec 24 '18 at 18:18